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Formation of a company

The most common forms of legal entity under Spanish corporate law are the corporation (“Sociedad Anónima” – S.A.), and the limited liability company (“S.L.”) (other corporate forms are described in Appendix I, section 2 of this Guide). The main differences between S.A.s and S.L.s are as follows (Table 6).

Table 6

THE MAIN DIFFERENCES BETWEEN S.A.S AND S.L.S ARE AS FOLLOWS

S.A. S.L.
Minimum capital stock €60,000 €3,00010
Payment upon formation At least 25% and any share premium. Payment in full.
Contributions A report from an independent expert on any non-monetary contributions is required. No report from an independent expert on non-monetary contributions is required, although the founders and shareholders are jointly and severally liable for the authenticity of any non-monetary contributions made.
Shares They are marketable securities. Debentures and other securities that recognize or create a debt, even bonds convertible into shares, can be issued. They are not marketable securities. Debentures and other securities that recognize or create a debt can be issued.
Transfer of shares Depends on how they are represented (share certificates, book entries, etc.) and on their nature (registered or bearer shares).
In principle, they may be freely transferred, unless the bylaws provide otherwise.
Must be recorded in a public document.
S.L. shares are generally not freely transferable (unless acquired by other shareholders, ascendants, descendants or companies within the same group). In fact, unless otherwise provided in the bylaws, the law establishes a pre-emptive acquisition right in favor of the other shareholders or the company itself in the event of a transfer of the shares to persons other than those referred to above.
Amendments to the bylaws The directors or shareholders, as the case may be, making the proposal must make a report No report is required.
Venue for shareholders’ meetings As indicated in the bylaws. Otherwise, in the municipality where the company has its registered office.
Attendance and majorities at shareholders’ meetings Different quorums and majorities are established for meetings on first and second call and depending on the content of the resolutions. These can be increased by the bylaws. Different majorities are established depending on the content of the resolutions. These can be increased by the bylaws.
Right to attend shareholders’ meetings A minimum number of shares may be required to attend the shareholders’ meeting. This right cannot be restricted.
Number of members of the board of directors Minimum: 3.
No maximum limit.
Minimum: 3.
A maximum of 12 members.
Term of the office of director Maximum 6 years. They may be reelected for periods of the same maximum duration. May be indefinite.
Issue of bonds Bond issues may be used as a means to raise funds. Bonds convertible into shares may be issued or guaranteed. Bond issues may be used as a means to raise funds, although the total amount of the issues may not be higher than twice the company’s equity, unless the issue is secured by a mortgage, by a pledge of securities, by a government guarantee or by a joint and several guarantees from a credit institution.
If the issue is secured by a joint and several guarantees from a mutual guarantee society, the limit and other conditions of the guarantee will be determined by the guarantee capacity of the society at the time of providing it, in accordance with its specific legislation.
Bonds convertible into shares cannot be issued or guaranteed.

Any foreign citizen or legal entity may freely be a shareholder of a Spanish company provided that he/she/it applies for a N.I.E. or N.I.F. as described in this Chapter.

In addition, any foreign citizen or legal entity may also be a director of a Spanish company, with the same requirement to apply for a N.I.E. or N.I.F.11 and, where shares are held in the company and/or compensation is received for services as a director, it will be necessary to register for social security purposes12 and therefore be a legal resident in Spain.

4.1 Legal formalities

  • The ordinary steps and expenses involved are similar for both legal forms and are detailed in the following tables Table 7.

Table 7

STEPS FOR THE INCORPORATION OF A SPANISH LIMITED LIABILITY COMPANY

REQUIREMENTS APPLICABLE TO ANY KIND OF LIMITED LIABILITY COMPANY OR CORPORATION
1.  Clear name search certificate Application to the Central Commercial Registry by the interested party or anyone authorized by it (may contain up to 5 alternative corporate names)13. The Central Commercial Registry will issue a name reservation certificate for the new company. Names are reserved for a period of six months as from the date of issue of the certificate.
2. Application for provisional N.I.F. See section 3.3 above.
3. Opening of a bank account Opening of a bank account in the entity’s name for payment of the capital stock. Once the founding shareholders have paid in the capital, the bank must issue payment certificates.
4. Document containing representations by the beneficial owner The founding shareholders must execute a document containing representations by the beneficial owner in accordance with Law 10/2010, of April 2814.
5. Execution of deed before a notary The founding shareholders must execute a public deed before a notary, containing:

  1. Evidence of the identity of the founding shareholders. If any of the shareholders is represented at the act of formation, a notarized power of attorney to represent the shareholder must be produced to the notary. If the power of attorney is issued abroad, it must be duly legalized15.
  2. Representations by the beneficial owner (see requirement 4 above).
  3. Evidence of contributions and whether they are to be made in cash or in kind (if applicable) using the corresponding bank documentation, as well as details of the capital stock subscribed by the shareholders (see requirement 3 above)16
  4. Clear name search certificate issued by the Commercial Registry (see requirement 1 above).
  5. Company bylaws.
  6. If the company is a limited liability company, the deed of formation must specify the initial form of the managing body, if the bylaws provide for different alternatives.
  7. Identification of and acceptance by the company directors.
  8. Subsequent declaration of foreign investment to the Register of Foreign Investment of the Directorate-General for International Trade and Investments (“DGCI”) of the Ministry of industry, trade and tourism (see Chapter 1, section 8 for further information). In some cases, limited mainly to foreign investments from countries or territories deemed to be tax havens, a prior declaration must be made (see Chapter 1, section 8 for further information).
  9. Identification of the economic activity code describing the activity in accordance with the National Classification of Economic Activities (CNAE).
  10. If the company is a corporation, the deed of formation must also state, at least approximately, the total amount of the formation expenses, both of those already paid and those merely envisaged until registration.

The deed must be executed within the three months following the issue of the clear name search certificate by the Central Commercial Registry.

6. Application for registration of the registered office at the Commercial Registry

The deed of formation will be submitted (I) telematically by the notary; or (ii) in person by the interested party.

7. Period for assessment and registration in the Commercial Registry

Fifteen (15) days as from the date of the entry recording the filing of the deed, unless there is just cause, in which case the period will be thirty (30) days.

8. Obtainment of definitive N.I.F. See section 3.3 above.
9. Opening formalities for tax and labor purposes Registration for the purposes of the Tax on Economic Activities: submission of Form 036. Companies being set up must describe the activities they are going to pursue and the reason why they are exempt from this tax.

The following, among others, are exempt from this tax:

  • Individuals are exempt in any case.
  • Legal entities during the first two years they pursue their activities.
  • Legal entities whose net turnover is less than one million euros
  • Nonprofit associations and foundations for people with physical, mental or sensory disabilities, for teaching, scientific or welfare activities.
  • Taxpayers that qualify for the exemption under international treaties.

This step must be completed before the company commences operations.

Registration for the purposes of Value Added Tax (VAT).

Obtainment of an opening/operating license, or, as the case may be, a sufficient enabling instrument for pursuit of the activity, from the relevant municipal council and/or State/regional authority17.

For labor purposes, please see Chapter 5, section 10.

As a general rule, setting up a corporation or limited liability company using the ordinary procedure takes between 6 and 8 weeks (for aspects relating to labor formalities and authorizations, see Chapter 5).

For additional information please visit www.investinspain.org.

In addition, Law 14/2013, of September 27, on support to entrepreneurs and their internationalization (the “Entrepreneurs Law”) provides an express regime for the telematic formation of limited liability companies, with and without standard bylaws, the content of which is implemented by Royal Decree 421/2015, of May 29 (regulating the standard bylaws and standard public deed forms for limited liability companies, approving the standard bylaws form, regulating the Notarial Electronic Agenda and the Exchange of reserved business names) and by Order JUS/1840/2015, of September 9 (approving the public deed form in standard format and codified fields of limited liability companies, as well as the list of activities that can be included in the corporate purpose18). This notwithstanding, according to the provisions of the Entrepreneurs Law, the regime will consist of the following steps in Table 8 and 9.

Table 8

a. FORMATION OF A LIMITED LIABILITY COMPANY WITH STANDARD BYLAWS:

STEPS
1 At the Entrepreneur Service Point (“PAE”):

1.1.  Completion of single electronic document (“DUE”) and commencement of electronic processing.

1.2.  Filing of request to reserve the name of the company (up to 5 different names) with the Central Commercial Registry, which will issue a certificate within the following 6 business hours.

1.3.  A date will immediately be set for the execution of the deed of formation by means of real-time communication with the electronic notarial agenda, obtaining information on the notary’s office, date and time of execution of the deed, which will be within the 12 business hours following the filing of the application.

2

The notary will:

2.1.  Authorize the deed of formation, attaching the document evidencing payment of the capital stock19.

2.2. Immediately send a copy of the deed to the tax authorities, requesting the assignment of a provisional NIF via the Business Information Center and Creation Network (“CIRCE”) remote processing system.

2.3. Send an authorized copy of the deed of formation to the Commercial Registry corresponding to the registered office via the CIRCE remote processing system.

2.4. Deliver an electronic uncertified copy of the deed of formation to the executing parties at no additional cost, which will be available at the PAE.

3

The Commercial Registrar, on receiving via CIRCE (a) an electronic copy of the deed of formation together with the provisional NIF assigned, and (b) evidence of the exemption from transfer and stamp tax, will:

3.1.  Assess the deed and register it within 6 business hours.

3.2. Send a certification of registration to the CIRCE on the same date of registration.

3.3. Request the definitive NIF.

4 The tax authorities will:

4.1.  Notify the definitive status of the NIF via the CIRCE.

4.2. Notify the N.I.F. via the CIRCE.

5 The formalities for commencement of the activity will be performed at the PAE, which will send the information contained in the DUE to:

5.1.  The State Tax Agency.

5.2. The Social Security General Treasury.

5.3. The local and autonomous community authorities, as the case may be.

Table 9

b. FORMATION OF A LIMITED LIABILITY COMPANY WITHOUT STANDARD BYLAWS:

STEPS
1 At the Entrepreneur Service Point (“PAE”), the founding shareholders may:

  • File a request to reserve the name of the company.
  • Set the date for the execution of the deed of formation.
2 The notary will:

2.1. Authorize the deed of formation, attaching the document evidencing payment of the capital stock20.

2.2. Immediately send a copy of the deed to the tax authorities, requesting the assignment of a provisional NIF via the Business Information Center and Creation Network (“CIRCE”) remote processing system.

2.3. Send an authorized copy of the deed of formation to the Commercial Registry corresponding to the registered office via the CIRCE remote processing system.

2.4. Deliver an electronic uncertified copy of the deed of formation to the executing parties at no additional cost.

3 The Commercial Registrar, on receiving the electronic copy of the deed of formation, shall initially register the company at the Commercial Registry within a period of 6 business hours, solely indicating the data relating to: (I) name, (II) registered office; (III) corporate purpose, (IV) capital stock; and (V) managing body.

Definitive registration will take place within the ordinary assessment period.

Once registered, the Commercial Registrar will notify the competent tax authorities of the registration of the company, requesting the definitive NIF.

4 The tax authorities will:

4.1. Notify the definitive status of the NIF via the CIRCE

4.2. Notify the N.I.F. via the CIRCE.

5 The formalities for commencement of the activity will be performed at the PAE, which will send the information contained in the DUE to:

5.1. The State Tax Agency.

5.2. The Social Security General Treasury.

5.3. The local and autonomous community authorities, as the case may be.

Nota: Cuando los socios fundadores opten por la constitución de una S.L. sin estatutos tipo, la tramitación de la constitución se podrá realizar utilizando el DUE y el sistema de tramitación electrónica CIRCE.

It should be noted that according to the Entrepreneurs Law:

  • Entrepreneur Service Points (“PAE”) are: offices belonging to public and private organizations, including notary offices, which will be tasked with facilitating the creation of new businesses, the effective commencement of their operations and their development, by providing information, processing, documentation and advisory services.
  • The Single Electronic Document (“DUE”) is the document containing the data that must be sent to the legal registries and to the competent public authorities for:
  • The formation of limited liability companies.
  • The registration at the Commercial Registry of the Individual Entrepreneur.
  • Fulfillment of the tax and social security obligations on commencement of the activity.
  • The performance of any other formality on commencement of the activity with the state, autonomous community and local authorities.

As a general rule, the telematic formation of limited liability companies takes approximately 15 business days.

4.2 TELEMATIC LEGALIZATION OF BOOKS

In accordance with article 18 of the Entrepreneurs Law and with the Instruction of February 12, 2015, of the Directorate General of Registries and the Notarial Profession, on the legalization of traders’ books in accordance with article 18 of Law 14/2013, of September 27, on support to entrepreneurs and their internationalization, all of the books that traders must keep in accordance with the applicable legal provisions will be legalized telematically at the Commercial Registry after they have been completed in electronic format and before four months elapse after the year-end date.

Regarding the books that are mandatory, their key features are as follows:

  Minutes book:

  • All of the minutes of the meetings of the collective bodies of commercial companies, including decisions adopted by the sole shareholder, must be reflected in electronic format and be submitted telematically for legalization within four (4) months after the fiscal year-end.
  • The company may keep just one book for all of the minutes of all of the collective bodies of the company, or a different book for each one of the collective bodies.
  • Each book must state the date of the start and the end of the fiscal year.

  Register of shareholders (S.L.) or register of registered shares (S.A. with registered shares):

  • Once the company has been registered at the Commercial Registry, it will be necessary to legalize a book which records the initial ownership of the founders and, once this initial book has been legalized, it will only be necessary to legalize a new book within the four months following the end of the fiscal year in which there has been any change in the initial or successive ownership of the shares or encumbrances have been created over them.
  • These books must record the full identity of the owners, their nationality and domiciles. The omission of the recording of the nationality or domicile will not preclude the book in question from being legalized, but this omission will be recorded in the legalization note.

  Book of contracts with the sole shareholder: This book is subject to the same rules as those applicable to the register of shareholders / register of registered shareholders.

It is possible to legalize any of the above books from a given year without those from the immediately preceding years having been legalized.

The signatures of the persons who authorize the request and the list of digital signatures generated by the books whose legalization is requested must meet the requirements laid down in the current legislation on qualified electronic signatures and with the mandatory certification of the certification services provider.

4.3 FEES AND COSTS

  Fees of the notary handling the formation:

  1. As a general rule, for corporations and limited liability companies formed under the ordinary regime, the fees are charged on a sliding scale based on the capital stock. For guidance purposes, the official rates amount to approximately €90 for the first €6,010, after which rates of between 0.03% and 0.45% are applied to amounts of between €6,010,121 and €601,012.10. For any amount in excess of €6,010,121.10, the notary will receive the amount that is freely agreed upon by the executing parties.
  2. For limited liability companies formed telematically whose capital exceeds €3,100 or whose bylaws are not adapted to any of the forms approved by the Ministry of Justice, the fee will be €150.
  3. For limited liability companies formed telematically whose capital does not exceed €3,100 and whose bylaws are adapted to one of the forms approved by the Ministry of Justice, the fee will be €60.

  Fees for registering the company at the local Commercial Registry:

  1. As a general rule, for corporations and limited liability companies formed under the ordinary regime, there are official rates that amount to €6.01 for the first €3,005, after which there is a sliding scale ranging from 0.005% and 0.10% for capital in excess of €6,010,121. The total fee is capped and may not exceed €2,181.
  2. For limited liability companies formed telematically whose capital exceeds €3,100 or whose bylaws are not adapted to any of the forms approved by the Ministry of Justice, the fee will be €100.
  3. For limited liability companies formed telematically whose capital does not exceed €3,100 and whose bylaws are adapted to any of the forms approved by the Ministry of Justice, the fee will be €40.

  Transfer tax under the “corporate transactions” heading, exempt in accordance with Royal Decree-Law 3/2010 (see Chapter 3)21.

  Charge for processing of the opening/operating license or solemn declaration by the municipal authority. A one-off municipal tax, ordinarily a relatively small amount22.

If, due to the type of activity, it is necessary to obtain prior administrative authorization, the corresponding charge will also have to be paid to the tax department of the regional or state authority granting authorization. Other expenses (e.g. professional fees) which are not readily quantifiable.


10 Except in the case of the entrepreneurial limited liability company, the rules for which are described in section 4.2 of Annex I.
11 Directorate-General of Registries and the Notarial Profession of January 18, 2012.
12 Articles 136 and 305 of Legislative Royal Decree 8/2015, of October 30, 2015, approving the revised General Social Security Law.
13 Applications for clear name search certificates may be made: Directly at the offices of the Central Commercial Registry with a printed application form. By mail, by sending an application or letter to the offices of the Central Commercial Registry. The Registry will issue the certificate in return for payment on delivery to the address indicated in the application. By telematic means, by filling the application form on the website: www.rmc.es (http://www.rmc.es/Deno_solicitud.aspx).
14 Law 10/2010, of April 28, on the Prevention of Money Laundering and Terrorist Financing requires the founders of a company to provide a declaration by the “beneficial owner”, that is, by the individual(s): on whose behalf, it is intended to establish a business relationship or take part in transactions; and/or; who, in the last instance, directly or indirectly own(s) or control(s) more than 25% of the capital stock or voting rights of a legal entity, or who by any other means exercise(s) direct or indirect control over the management of a legal entity.

15 There are two main procedures for such legalization:

  • Execution of the powers of attorney in the presence of the Spanish Consul in the foreign investor’s home country. The foreign investor appears before the Spanish Consul, provides evidence of his identity and grants the related powers of attorney. If a company, rather than an individual, is the foreign shareholder, apart from his identity, the person appearing before the Spanish Consul must provide evidence of his capacity to grant the powers of attorney to the designated person in the name and on behalf of the shareholder.
    The Spanish Consul may demand any documentation he considers necessary and will proceed to grant a deed of power of attorney, in Spanish, to the designated person. This power of attorney may be used directly in Spain.
  • Execution of the power of attorney in the presence of a foreign public authenticating officer. The foreign investor appears before the authenticating officer, provides evidence of his identity and grants the related power of attorney. If the foreign investor is a company, its representative shall execute the power of attorney in the presence of the public authenticating officer, who will certify the document as well as the identity and capacity of the representative of the foreign investor to grant the power of attorney. The signature of the foreign authenticating officer would also require subsequent legalization (either by the “apostille” procedure approved by The Hague Convention of October 5, 1961, or by a Spanish Consul abroad). Under this second procedure, the power of attorney would normally be issued in the language of the authenticating officer who attests to the act, meaning a sworn translation into Spanish would also have to be provided.

16 It will not be necessary to evidence the reality of the monetary contributions in the case of entrepreneurial limited liability companies (see Annex 1, section 4.2).
17 In this connection, in accordance with the provisions of Law 12/2012 on Urgent Measures to Deregulate Trade and Certain Services, permanent establishments used for commercial retail purposes and the provision of certain services provided for in the Schedule to the Law with a useful sales and display area of up to 750 m2 will not generally be required to obtain an opening and operating license beforehand, but rather to submit a solemn declaration or prior communication. However, when the planned commercial activity implies the establishment of a large retail outlet, it will be necessary to hold industry authorization or an equivalent instrument granted by the competent body of the regional government.
18 For these purposes, it is established that the standard form of public deed will be used to form a limited liability company with and without standard bylaws (art. 6 Royal Decree 421/2015, of May 29).
19 It will not be necessary to evidence the reality of the monetary contributions in the case of entrepreneurial limited liability companies (see Chapter 2, section 4.2).
20 It will not be necessary to evidence the reality of the monetary contributions in the case of entrepreneurial limited liability companies (see Chapter 2, section 4.2).
21 The decision by the Directorate-General of Registries and the Notarial Profession of January 26, 2012, establishes that in forming companies domiciled in territories where rules or instructions have been handed down regarding the settlement of transfer tax (including under the corporate transactions heading), the relevant tax return must be submitted together with the deed of formation at the relevant Commercial Registry.
22 In accordance with the provisions of Law 12/2012 on Urgent Measures to Deregulate Trade and Certain Services, permanent establishments used for commercial retail purposes and the provision of certain services provided for in the Schedule to the Law with a useful sales and display area of up to 750 m2 will not generally be required to obtain an opening and operating license beforehand, but rather to submit a solemn declaration or prior communication. However, the start-up of certain large retail outlets may require the obtainment of authorization or an equivalent instrument granted by the competent body of the regional government.